NAO finds Muscat-Mizzi-Schembri’s ‘fingerprints’ all over the hospitals’ deal

A third and final investigative report by the National Audit Office (NAO) on one of Malta’s most tainted government deals has reconfirmed the crucial role played by the Muscat-Mizzi-Schembri triumvirate in handing over three public hospitals to Vitals Global Healthcare in 2016 and then to Steward Health Care in 2018.

The report also focused on the shady role played by Armin Ernst, first CEO of Vitals and then Steward, who was the ‘foreign investor’ interlocutor in the deal now gone awry.

Reconfirming how the government negotiated the multi-billion-euro deal without following procurement rules, a fact now confirmed by the courts, the report delves into the crucial roles played by Joseph Muscat, Konrad Mizzi and Keith Schembri in concocting a deal behind the Cabinet’s back.

The report puts Konrad Mizzi at the forefront of the whole mess despite his refusal to collaborate with the NAO’s investigation.

The NAO found that Konrad Mizzi – on the instruction of then-Office of the Prime Minister chief of staff Keith Schembri and disgraced former prime minister Joseph Muscat – gave the go-ahead to transfer the deal to Steward before it was endorsed by Cabinet.

The same happened when it came to several multi-million-euro loan guarantees the government gave to Bank of Valletta, which lent tens of millions of euros to Steward. They were all endorsed by Mizzi without Cabinet’s authorisation.

The same method was used to seal a side agreement to guarantee payment of €100 million to Steward if the deal fell through.

Correspondence examined by the NAO revealed the nature of the discussions held behind closed doors, mainly between Schembri and Ernst, who was first the CEO of VGH before he moved over to Steward Healthcare.

It also reveals how Ernst was the lead negotiator pushing for Steward to take over the concession, with the NAO confirming the American company’s haste when it blindly entered into the concession.

Ernst, who changed hats during the deal, was also the man who had approached the government through Keith Schembri about the possibility switching the concession from VGH to Steward in a meeting in New York. The negotiations were carried out behind the health minister’s back.

“The disjointedness of government emerges most clearly in the correspondence submitted by Ernst to Keith Schembri, wherein he sought the clearance of Schembri on whether to disclose any information regarding progress on the discussions to Minister Chris Fearne,” the NAO found.

The report clearly shows how Fearne, despite being the deputy prime minister, was completely sidelined by Muscat, Mizzi and Schembri. Still, Fearne publicly stated that Steward was the “real deal”.

According to the NAO, while the VGH Director Sri Ram Tumuluri told the NAO that the transfer of the public concession was done for a nominal fee of just €1, correspondence submitted by Ernst to Schembri highlighted that “the initial payment to Tumuluri was of €2.5 million”.

In his deposition to the NAO, Tumuluri claimed that he “was forced to transfer the shares of VHG under duress, despite him having no intention to do so”.

According to the NAO, Tumuluri indicated his willingness to disclose further information subject to sufficient legal safeguards being provided, which the NAO was not empowered to give.

“If that allegation is true, then the actions of those involved in exerting duress draw the NAO’s gravest concern,” the report found.

The NAO said that, according to Tumuluri, “There were instances when the government thwarted efforts at securing financing by withholding documentation required by the bank through which the financing was sought.”